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India’s defence procurement and production policy THE WAY AHEAD

Indian transition to indegenisation has been status quo or even downward trend in many aspects. The author recommends way ahead from 'indecision and mindsets to autonomy and commitment’

India must not lose sight of its primary goal of becoming a regional power. For this, as history has proven over innumerable campaigns and conflicts that indegenisation and industrialization have been the virtual power houses of war capability. The victorious allies of World War-II acknowledged the dominant role played by military industrialization as compared to the same factor becoming the cause of defeat of the allies in World War-I. Accounts of preparedness of our war machinery and the Indian military continue to remain a serious concern with limited progress over the years.

Operational readiness today is perhaps to be viewed not just as state desirable for conflicts or any other contingencies, but as an imperative of the Indian Army being a Military of reckoning as a tool of the National Security Architecture.

Contrarily, Indian transition to indegenisation has been status quo or even downward trend in many aspects. The concept of offsets, revision of the defence production policy DPP, the approach of “Make", "Buy and Make” have not yet taken the situation to the desirable end state.

State Of Indian Military Readiness

The state of operational preparedness of the Indian Army requires induction of new equipment on urgent basis to plug huge operational gaps in artillery, aviation, missiles especially ATGMs, air defence, night-fighting, and specialised tank and rifle ammunition. Additional requirements for raising the new mountain strike corps will add to operational requirements.

The PM's recent reminder to top military commanders to “cut our coat according to our cloth”, was hinting of annual 15 per cent defence procurement budget hikes no longer being assured.

Army combat equipmentThe steady decline in number of defence contracts signed during the 11th five-year plan period (2007-2012) reiterate this trend, with 84 in 2007-08, 61 in 2008-09, 49 in 2009-10, 50 in 2010-11, 52 in 2011-12, 25 in 2012-13 and 09 in 2013-14. With nearly 70 percent imports, the Indian Military is the biggest buyer of Military equipment. The Army Combat Equipment highlighted in the recent issue of Defence ProAc Biz News quantifies this discrepancy on the left.

International Experiences

Taking examples of procurement and co-production in this context will be relevant here.
The ten year, USD 30 billion Military Aid Package signed between US Administration (Bush) and the Isaraeli Govt in 2007 will span the period 2009 to 2018 that pledges continued commitment of military aid under PL…113-6, as part of which, missile defence programmes as the Iron Dome, David Sling, Arrow II & Arrow-III have been allocated. Recent Legislation on this programme in 2013 would even exempt Israel from need for a US permission to sell American Control Technology to third world countries.

The US Military co-production programme under the Government Accountability Office (GAO) with countries like Japan for F-15 aircraft that is not just a perspective of National Security, but enables the US partner to obtain advance technology expert capability and increase self-sufficiency. With its own advanced & evolving technology, Japan could work to become a global leader in civil air craft production and marketing.

US contract for supply of C-17 globe master-III air craft to India is a successful example of G to G sale between the two countries.

BAE systems can develop India as a global hub for artillery if the procurement of FH-77 BE-05 towed howitzers succeeds. The ongoing partnership between BAE and HAL for supply of Hawk Trainer Jets to the IAF is still to show results.

The solitary successful co-production programme is the Indian-Russian Joint Venture for Brahmos Missile which surprisingly could not be replicated in any other sustainable programme.

Defence Production Policy 2011

India's Defence Production Policy was released by the Ministry of in November 2011, a comprehensive statement of the government's intent that was expected to impel a new thrust towards promoting self-reliance in defence. The stated objectives of the policy were to focus on the following aspects:
» Achieve substantive self-reliance in design, development and production of equipment, weapon system and platforms required for defence in as early a time frame as possible.
» Create the conditions conducive for the private industry to play an active role in this endeavor.
» Enhance the potential of small and medium enterprises (SMEs) in indigenization. And
» Broaden the defence research base and development base of the country.

Analysis

Capability Gap

India's modernization programmes for every service have been significantly delayed for reasons of inadequate planning and less than fool proof systems. The reiteration, “India needs to speed up the indigenisation process of its defence production in order to root out corruption from the sector”, Defence Minister AK Antony on Wednesday 20 February 2013, adds a new priority to our objectives.
Review of the status of just four major equipment in terms of progress vis a vis initial contracts reflects inability of endless reviews and studies to make any significant change, or is the entire process of modernization simply namesake instead of credible towards battle worthiness.

Recce and Surveillance Helicopter

The ($1.5 bn ) Rs 3000 crore contract first withdrawn in 2007, reinitiated by new RFP in 2008 for 197 Recee and Surveillance helicopters supposed to replace Cheetah and Chetak of 1970's vintage, expired in Apr 2013 four years after the RFP was signed and the commercial bid extended six times. Technical evaluation was not complete ever after 38 months and CNC proceedings were pending when the contract expired.

T-90 Tank Contract

Progress on T-90 tank contract signed in 2001 is even more bizarre, ridden by external and internal glitches. Delay in transfer of technology and supply of major assemblies by Russia delayed the indigenous production by six years till 2007. Internally, of the 1000 tanks to be produced in HVF Avadi (India), orders for 300 tanks had been given till 2011 by the concerned agency, and 215 tanks actually produced by 2013. The cost factor of the Russian produced tank was 11 crores at the time of contract and had escalated to 18 crores for those built in Avadi.

Tank Ammunition

The Tank ammunition is being imported even after 15 years as the DRDO has failed to develop required ammunition. Indigenously developed ammunition produced at OFB factories have also performed poorly resulting in the import of ammunition. The Army was forced to call for tenders in late 2010 for 75,000-100,000 rounds of FSAPDS (AMK-339) ammunition. Situation has not improved since then.

Artillery

The army in 1999 initiated a USD 8 Billion Artillery Modernization Program called(or) Field Artillery Rationalization Plan (FARP) for acquiring about 3,600 155mm/52-cal towed, motorized and tracked howitzers for 180 of its 220 field artillery regiments by 2020. These included 155mm Towed Guns,155mm Air Mobile Ultra Light Howitzers,155mm wheeled Guns, as also Precision guided and extended range munitions, Bi-Modular Charge Systems, Electronic Fuzes, Automated Fire Control Systems and HALE & MALE UAVs, the status of which is well known.

Credibility Gap

In the third year since a ceremonial projection of the new policy, the state of change is minimal. Definitive clarity remains elusive in the bureaucratic jargon, that emerges in different wrappings each time. Major observations raised by several research/ study group in this direction are :-
» FDI at present 26 percent is an illusionary factor that may not be enough to inspire sharing advanced technologies without assurance of reasonable scales of manufacturing or even exporting permits and agreements.
» The ToTs of MiG-21, T-72, T-90, and others, DPSUs have been delayed significantly apart from necessitating further ToTs with each purchase.
» The Indian motivation to continue supporting a very mediocre standard of DPSUs has led to serious challenges for Foreign Partners through government offices' pressures which need a major review.

Important aspects that require greater clarity, qualification and quantification towards empowering the system are as under :-
» A public version of the Long Term Integrated Perspective Plan must be available in the open domain.
» Areas of focus and priority that India seeks entry of the foreign Industry in, and perhaps what level would enhance objectivity in the entire process.
» Objectives for 'Self Reliance' in terms of Equipment, support system, ammunition or related aspects need to be qualified, facilitating clarity in choice for the Indian Industry as also the others.
» Selection of the production agency for any project must be left to the Industrial Houses and their prospective partners and no longer restrained by Defence Production and DRDO .
» Designating areas for focus by the DPSUs and the Ordnance Factory Board within their present capability today, as also futuristic projects commensurate with their potential for capacity building in terms of design and development, dedicated research and manufacture of advanced system in respective fields.
» Finally, the Ministry must take a lead in facilitating enhanced foreign direct investment, simplifying taxation, and export and manufacturing licenses to inspire and support the participants by eliminating traditional obstructions at several levels of government offices.

The Way Ahead

Of the numerable challenges, only the structural aspect of the existing system and recommendation for change are being addressed in this paper.

Removing Functional and Structural Anomalies

Organisationally, the Union War Book has mandated the Ministry of Defence with a comprehensive and enormous responsibility in context of National Security responsibilities. Given the long history of conflict on our multiple borders, increasing acrimony with our neighbours, and major internal security challenges, challenges of modernization and procurements draw heavily upon their time and resources. Notwithstanding the commitment of the civilian officers of the Ministry of Defence, there is a critical need for an independent authority to manage procurements, production and modernisation, and related procedures, processes and practices.

Secondly, while Government to Government sales will continue to offer good options, the strategy of co-production in collaboration / partnership with advanced Militaries will perhaps be the best way forward.

Concept

Any new structure may well have to be autonomous and independent of government agencies and establishments that have impacted the state of modernization and operational readiness despite comprehensive and sustained efforts.

Setting up an overarching authority such as Defence Procurement And Modernization Agency (DPMA) that is autonomous must be the first step in this direction. This agency may be headed / led by renown industrialists or scientists of established credibility, knowledge and experience to lead this change. Such agency will comprise senior members from Industry, scientific community, User Military Representatives, CII, Military Technology Council (explained in the succeeding paragraph), Defence Finance, Central Vigilance Commission, Legal Department and the DRDO.

A subsidiary body, perhaps "Defence Technology Council" (DTC) to address the vast and complex spectrum of Military Technology required for military usage, independent of the existing MoD hierarchy like the DPMA with full authority to identify, explore and manage technology appears inevitable to me. The composition of such council can be similarly identified.

Approach

The role and authority of the above agencies would be to translate our National Security Strategy to the extent it exists, to set/fix levels of modernisation and upgrades by procurement or production over a period of next ten years as prioritized by respective Arms & Services.

» Whoever provides advanced technologies will likely remain a long-term partner. The various military challenges and changing security dynamics that face India regionally and globally must not affect India in its procurements and/or co-production agreements.
» India must work honestly with partners to develop India's own indigenous arms capabilities through realistic expectations and mutually beneficial agreements.

Implementation

Implementation of change will need to begin at the structural level, and then ensure transparency and level playing fields to one and all. Progressive reorganisation and considerations that could propel the desired change are :-

» Establish the DPMA and the DTC or equivalent Authorities, with their given role, objectives and organization that can comprehend the security environment, and translate the need into requirements.
» Review Capability Index of major and established players in the private industries in terms of specialization, experience in weapon and/or system production and future growth
» Assign Modernisation Objectives enunciated by the overall authority to Indian private industry commensurate with their capability.
» Assign Modernisation Objectives and Targets to existing DPSUs for enhanced production or upgrading them in their capability.
» The DRDO must be restructured in two components, one for research/acquisition of advance technology in the defence sector in conjunction with external/foreign agency and the second component must completely oversee the process of integration of ToT of equipment underway as part of the ongoing projects.

Conclusion

The progress on procurement and production despite years of efforts to change has been limited in terms of transition to self reliance and indigenisation and unable to address declining combat ratios. This calls for a paradigm shift in both concept and approach to achieve self-reliance or indigenisation.
Innovative thinking and non traditional measures alone can reinvigorate the existing system to requisite levels of autonomy, authority and implementation, taking us to achieve desired end states. For this, the structural change recommended may work to extricate us from a state of 'Indecision and Mind sets to Autonomy and commitment'.

The author is ex Vice Chief of Army Staff

Lt. Gen. (Retd.) Arvinder Singh Lamba

Lt. Gen. (Retd.) Arvinder Singh Lamba

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